Question 1

The government finances the deficit by borrowing directly from the private sector,the banking system,government agencies,and foreign investors.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is most likely to increase a federal budget surplus?

Accepted Answer

A) A higher inflation rate and a higher unemployment rate. 
B) A higher inflation rate and a lower unemployment rate. 
C) A lower inflation rate and a higher unemployment rate. 
D) A lower inflation rate and a lower unemployment rate. 
A) A higher inflation rate and a higher unemployment rate. 
B) A higher inflation rate and a lower unemployment rate. 
C) A lower inflation rate and a higher unemployment rate. 
D) A lower inflation rate and a lower unemployment rate.

Question 3

With greater deficit spending,ceteris paribus,

Accepted Answer

A) Aggregate spending should fall. 
B) Any inflationary gap will become larger. 
C) There are greater leakages. 
D) There is inadequate information to tell what happens to aggregate spending. 
A) Aggregate spending should fall. 
B) Any inflationary gap will become larger. 
C) There are greater leakages. 
D) There is inadequate information to tell what happens to aggregate spending.

Question 4

Discretionary expenditures account for approximately

Accepted Answer

A) One-fifth of the federal budget. 
B) One-half of the federal budget. 
C) One-third of the federal budget. 
D) Three-fourths of the federal budget. 
A) One-fifth of the federal budget. 
B) One-half of the federal budget. 
C) One-third of the federal budget. 
D) Three-fourths of the federal budget.

Question 5

A measure of the burden of continual deficit financing over time is the ratio of

Accepted Answer

A) The deficit to the GDP. 
B) The debt to the GDP. 
C) The deficit to the debt. 
D) Tax revenues to the debt. 
A) The deficit to the GDP. 
B) The debt to the GDP. 
C) The deficit to the debt. 
D) Tax revenues to the debt.

Question 6

If Congress failed to keep the deficit below the ceiling,then the Gramm-Rudman-Hollings Act required

Accepted Answer

A) Automatic spending cuts. 
B) Automatic tax increases. 
C) Automatic stabilizers. 
D) A balanced budget. 
A) Automatic spending cuts. 
B) Automatic tax increases. 
C) Automatic stabilizers. 
D) A balanced budget.

Question 7

If the cyclical deficit shrank by $60 billion while the structural deficit increased by $35 billion,the total deficit

Accepted Answer

A) Fell by $25 billion. 
B) Grew by $25 billion. 
C) Grew by $95 billion. 
D) Fell by $60 billion. 
A) Fell by $25 billion. 
B) Grew by $25 billion. 
C) Grew by $95 billion. 
D) Fell by $60 billion.

Question 8

Debt servicing refers to the repayment of principal on the debt.

Accepted Answer

A) True 
 B)False

Question 9

In the 20th century,the ratio of the U.S.debt to GDP has largely

Accepted Answer

A) Risen in response to wars. 
B) Been inversely related to the deficit to GDP ratio. 
C) Fallen during wartime compared with prewar levels. 
D) Fallen to its lowest levels during recessions or depressions. 
A) Risen in response to wars. 
B) Been inversely related to the deficit to GDP ratio. 
C) Fallen during wartime compared with prewar levels. 
D) Fallen to its lowest levels during recessions or depressions.

Question 10

Which of the following is the best indication that the government is pursuing restrictive fiscal policy?

Accepted Answer

A) The total deficit increases. 
B) The structural deficit increases. 
C) The cyclical deficit increases. 
D) The structural deficit decreases. 
A) The total deficit increases. 
B) The structural deficit increases. 
C) The cyclical deficit increases. 
D) The structural deficit decreases.

Question 11

If the economy is in a recession,

Accepted Answer

A) It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero. 
B) Deficit spending will not increase the size of the debt because interest rates will be falling. 
C) The economy suffers from structural unemployment,which can be alleviated by debt refinancing. 
D) Larger deficits will decrease the national debt. 
A) It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero. 
B) Deficit spending will not increase the size of the debt because interest rates will be falling. 
C) The economy suffers from structural unemployment,which can be alleviated by debt refinancing. 
D) Larger deficits will decrease the national debt.

Exam 12: Deficits and Debt

The government finances the deficit by borrowing directly from the private sector,the banking system,government agencies,and foreign investors.

Which of the following is most likely to increase a federal budget surplus?

With greater deficit spending,ceteris paribus,

Discretionary expenditures account for approximately

A measure of the burden of continual deficit financing over time is the ratio of

If Congress failed to keep the deficit below the ceiling,then the Gramm-Rudman-Hollings Act required

If the cyclical deficit shrank by $60 billion while the structural deficit increased by $35 billion,the total deficit

Debt servicing refers to the repayment of principal on the debt.

In the 20th century,the ratio of the U.S.debt to GDP has largely

Which of the following is the best indication that the government is pursuing restrictive fiscal policy?

If the economy is in a recession,

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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